U.S. Dept. of Commerce Imposes Severe Penalties on Hynix

The government has expressed its strong regret over a preliminary ruling of the U.S. Department of Commerce to impose high countervailing tariffs on Hynix Semiconductor Inc. It also has decided to set up a countermeasure ad hoc team to actively deal with it.

In addition, the government is considering a plan to take this case to the World Trade Organization (WTO) if the U.S. Department of Commerce and the International Trade Commission issue final rulings to impose countervailing tariffs at the end of July.

“Disappointedly, the U.S. Department of Commerce has decided to impose a high import duty of 57.37% on memory chip shipments by Hynix in its preliminary ruling,” said Director General of Bilateral Trade Bureau Park Sang-ki. “When the investigation team comes to Korea at the end of this month, the government will actively explain that Hynix` creditor banks, including the Korean Exchange Bank, voluntarily provide financial aid.”

“Creditor banks helped Hynix through debt-equity swaps because reviving the company would be better for them to collect debts. Foreign banks that have shares in Korea Exchange Bank agreed to the decision,” Park added. “We will explain all about this later.”

The Federation of Korean Industries (FKI) said in a statement, “We use the term `subsidies` when three conditions are met: intervention by the government or public institutions; financial contribution to a company; and favors to a company.” The FKI claimed that financial aid by Hynix` creditor banks cannot be considered subsidies.

Previously, the U.S. Department of Commerce has imposed severe countervailing tariffs of 57.37% in a preliminary ruling on April 1, saying “Financial aid by banks is as good as the Korean government`s subsidies.”

The preliminary ruling will be confirmed through a final ruling from the Department of Commerce on June 16, over whether the Korean government provided subsidies to the memory chip maker, and the International Trade Commission on July 31 over whether American companies were damaged.

This will be seen as a problem for Hynix, because the company will have to deposit the amount of countervailing tariffs on memory chip shipments for the Department of Commerce even before the final ruling at the end of July.

Regarding this, Hynix announced, “If we export memory chips to Southeast Asian countries, the impact will be reduced.”

In the meantime, Head of the European Union Delegation Dorian Prince said in a press conference at Hotel Shilla in Seoul on April 2, “The three times of financial aid by the Korean government to the memory chip maker over the past two years cannot be considered normal trading activities.” He added that the inquiry of the European Union on South Korean DRAM has been in fact finished, and the EU`s preliminary decision will come before April 24.

Ja-Ryong Koo Mi-Kyung Jung bonhong@donga.com mickey@donga.com